Montelepre Systemed, Inc. v. Commissioner of Internal Revenue

REAVLEY, Circuit Judge:

Taxpayer Montelepre Systemed, Inc. (Systemed) gave up one of its rights under a management contract in exchange for money. The Tax Court characterized the payment that Systemed received as compensation taxable under 26 U.S.C. § 83 in the first year that Systemed’s right ceased being subject to a substantial risk of forfeiture. We hold that Systemed’s right was subject to a substantial risk of forfeiture until Systemed disposed of that right, and that the assignment-of-income doctrine precludes application of 26 U.S.C. § 337 to the payment that Systemed received. We…